The Secondary Mortgage Market Flashcards
What is the role of the secondary mortgage market?
The secondary mortgage market consists of holding warehouse agencies that purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors.
Who are the three major players in the secondary mortgage market?
Ginnie Mae
Fannie Mae
Freddie Mac
What was the first mortgage-backed security called and why was it called this?
It was called a pass-through security because the monthly principal and interest payments were collected from the borrowers and then “passed through” to the investors.
What is Ginnie Mae’s most heavily traded product and what is the minimum pool size?
Ginnie Mae I MBS is the most heavily-traded MBS product, based on single-family pools. The minimum pool size is $1 million.
Why did the federal government establish Fannie Mae?
The federal government established Fannie Mae to increase the flow of mortgage money by creating a secondary market to purchase Federal Housing Administration (FHA)-insured mortgages.
What important action took place with the 1968 Charter Act?
Under the 1968 Charter Act, Fannie Mae became a fully private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits.
What automated underwriting systems does Fannie Mae have available for users and for whom are they designed?
Desktop Underwriter (DU) ® is designed for lenders. Desktop Originator (DO) ® is designed for brokers and correspondents.
Name and explain the two Native American loan programs supported by Fannie Mae.
Section 184 loans are specifically designed for American Indian and Alaska Native families, Alaska Villages, Tribes, or Tribally Designated Housing Entities. Section 184 loans can be used, both on and off native lands, for new construction, rehabilitation, purchase of an existing home, or refinance.
Section 248 loans are available for homes located on Indian tribal trust land or restricted land, including Alaska native areas
Why was Freddie Mac created and what is its mission?
Freddie Mac was created in 1971 to develop a mortgage-backed security for conventional loans. Freddie Mac’s mission is to provide stability, affordability and opportunity to the housing market by putting home ownership within reach for minority populations and making rental housing more affordable.
The Freddie Mac Affordable Merit Rate Mortgages are designed for whom?
Borrowers with weak credit reputations or past credit challenges
What do Home Possible mortgages do?
Home Possible Mortgages offer flexible underwriting, low-to-no down payments, expanded loan-to-value (LTV) ratios and other special underwriting features to underserved qualified borrowers.
Explain Don’t Borrow Trouble.
Don’t Borrow Trouble is an anti-predatory lending campaign, combining extensive public education with comprehensive counseling services. This program is designed to help homeowners avoid scams and resolve any financial difficulties they may be experiencing.
The secondary mortgage market consists of
holding warehouse agencies that purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors.
Mortgage funds can be shifted to where they are most needed in a variety of ways.
Lenders can sell loans to one another.
One institution can sell a part interest in a block of loans to another institution.
A more common way of shifting funds is through the use of mortgage-backed securities (MBS), which are backed by a pool of mortgages.
Important players in the secondary mortgage market are:
Ginnie Mae – Government National Mortgage Association (GNMA) – a government agency
Fannie Mae – Federal National Mortgage Association (FNMA) – a former government agency that became a private corporation in 1968
Freddie Mac – Federal Home Loan Mortgage Corporation (FHLMC) – a quasi-government agency
Ginnie Mae, Fannie Mae, Freddy Mac
These agencies, collectively known as government-sponsored enterprises (GSE), purchase loans or guarantee mortgage-backed securities issued by lenders.
Ginnie Mae developed the first mortgage-backed security in 1970
This security was backed by a pool of FHA and VA mortgages. Ginnie Mae doesn’t purchase mortgages; it guarantees that the monthly payments will be made every month.
Ginnie Mae has two types of mortgage-backed securities (MBS) programs.
Ginnie Mae I MBS are based on single-family pools and are Ginnie Mae’s most heavily-traded MBS product.
Ginnie Mae II MBS are modified pass-through mortgage-backed securities.
Fannie Mae pools loans that generally
conform to their standards and converts them into single-class mortgage-backed securities known as Fannie Mae MBS, which they then guarantee as to timely payment of principal and interest.
The mortgages that back a Fannie Mae
MBS are held in a trust on behalf of Fannie Mae MBS investors and are not Fannie Mae assets.
Fannie Mae has two automated underwriting systems available for users.
Desktop Underwriter (DU)® Desktop Originator (DO)®
Fannie Mae has developed a variety of mortgage products that include the following:
Adjustable Rate
Fixed Rate
Home Construction & Renovation
No/Low Down Payment
Freddie Mac has a variety of fixed-rate mortgage products that include the following:
15-, 20-, 30- and 40-year terms
Affordable Merit Rate Mortgages
Guaranteed (Section 502) Rural Housing (GRH) Mortgages
HUD – Guaranteed Section 184 Native American Mortgages
Freddie Mac has several other mortgage products
including adjustable and balloon mortgages, mortgages designed for borrowers with less-than-perfect credit and a group of products called Home Possible Mortgages, which offer flexible underwriting, low-to-no down payments, expanded loan-to-value (LTV) ratios and other special underwriting features to underserved qualified borrowers.
